Debt and Foreclosure

Here are some main points from a recent video of Robert Kiyosaki and Rodney Anderson speaking on debt and foreclosure.

There are 2 options for homeowners (US) that can no longer make payments:

• Short sale – You sell the property for less than you owe. For example, you owe $250,000 and sell for $180,000. The bank writes of $70,000 + fees. This goes on your credit history as a short sale.

There is always a waiting period of 3 years for government loans and 4 years normally for regular loans.  On a short sale your waiting period starts the day of the sale.

• Foreclosure – You hand the keys to the bank to get rid of the property. The bank eventually sells it which could take a year or longer. They’ll probably sell at a loss as well anyway. The x-home owner has to wait until the bank sells for the waiting period to start.

Some people with equity on their property actually hand the keys to the bank. (i.e. House is worth $200,000 they owe $150,000) to get rid of it when they should be short selling it.

Banks are currently overwhelmed with foreclosures and are taking forever to respond to offers from buyers. Mr. Anderson is under the opinion that it could take 5-10 years to clear up the housing mess.

Loan approvals keep getting tighter limiting even more the number of qualifies buyers. FICO score (credit score in the US) should be above 740 to make it easier to get a loan. In many instances now they are looking at just last year’s income instead of the average of the last 2 years become so many people’s income has dropped off in the last year.

Back in 1990 during the last real estate crash Kiyosaki got ‘lucky’ (according to him) because there was a special condition allowing people (Veterans?) to get property loans even with a bad credit history (FHA or VA blind loan).